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Understanding Social Security

How to ace one of your biggest financial decisions

“Social security is the very foundation of retirement security for millions of Americans.” ~ Sue Kelly, Republican Politician

Social security is one of the finest achievements of the US government in the 20th century. It has served and continues to serve as a significant income source for retirees throughout the country. A recent survey indicates that roughly 57% of retired Americans consider social security as a considerable source of income. Additionally, it is estimated that approximately 90% of the current retirees and 83% of non-retirees rely on social security to provide at least some assistance during retirement.

These figures are a clear indication that America relies on social security during retirement; however, there is a huge fundamental problem with this ongoing trend.  According to the Social Security Administration, the average social security amount after the cost-of-living-adjustments was $1,461 in January 2019. Social security was never built to serve as a major source of income; instead, it was supposed to provide financial assistance to the aging population. The growing reliance on social security would leave retirees financially stressed during retirement.

For people ready to retire over the next couple of years, it is critical to understand the intricacies of social security and how they can maximize their monthly benefits. This guide intends to inform the readers about the basics of social security, strategies to boost their payouts, and different factors that affect their benefits.

Understanding the basics of social security

What is it?

Social security is a retirement benefit given to retirees who paid social security taxes during their employment. Ida May Fuller was the first recipient of monthly social security benefits in 1940. An individual should reach at least the qualified retirement age to start receiving benefits, applicable to deductions, and full-retirement age to receive full benefits.

How do you qualify for social security?

In order to qualify for social security benefits, you must earn enough credits throughout your employment history. The good news is that you only require 40 credits or approximately ten years of employment history to qualify for social security benefits.

How do you earn credits for social security?

Your earning should be more than $1,360 in 2019 to receive one social security credit or more than $5,440 to earn four credits annually. It is critical to understand that one can earn a maximum of four credits in any given year irrespective of his income level.

How does the government calculate social security benefits?

The Social Security Administration takes your earnings history into account for calculating your social security benefits. It is a three-step process:

–       The SSA adjusts your earnings in proportion to any historical changes in the US wages. It takes your 35 best or highest-paid years into account for calculation. After that, it identifies your average indexed monthly earnings (AIME).

–       After identifying your AIME, the SSA applies a social security formula to this figure to determine your monthly social security benefits. For 2019, this formula considers 90% of your first $926 out of the AIME; then it takes 32% of the amount between $926 and $5,583 as per your AIME; and lastly, it takes 15% of any remaining amount over $5,583. The SSA adds all of these figures to arrive at your full retirement benefit estimate. This is the amount you are qualified to receive after the full retirement age (FRA).

–       Under the last step, the SSA reduces your full-retirement benefit by up to 25% if you claim social security at age 62, whereas it adds approximately 8% for every year you delay your benefits after the qualified retirement age, 66 or 67 years, up to 70 years.

Note: If a worker has an employment history of fewer than 35 years, the SSA credits the worker with zero earnings for vacant or unemployed years. Additionally, social security benefits are calculated every year and adjusted for inflation as well as the cost of living adjustments.

Disappearing strategies to boost social security

File and suspend strategy

Under the file and suspend strategy, a worker could file for benefits at FRA and then immediately suspend them. This simple action would trigger social security benefits for a spouse or any other qualifying family member. At the same time, the benefits of the worker would continue to accrue until 70 years, growing up to 32%. There is a provision to collect lump sum benefits for the suspended years, although it would forfeit any of their delayed retirement credits.

Restricted claims for spousal benefits

Under the restricted claims for spousal benefits strategy, a married or eligible divorced spouse can collect half of their partner’s benefits after reaching FRA, while their retirement benefits continue to grow until 70 years.

Why these strategies are going away

The Bipartisan Budget Act of 2015 ended or at least limited the benefits of each of these strategies. As per the act, the file and suspend strategy is only applicable to workers who applied the strategy prior to April 29, 2016. Similarly, the restricted claims for spouse benefits strategy is now available for spouses who were born before or on January 1, 1954, provided they have already reached FRA. The regulations for widows/widowers or dependent children under the restricted claims for spouse benefits are different and will be discussed in the coming sections.

Social security rules for married couples, widows/widowers, and disabled beneficiaries

Married couples

Social security regulations favor married couples. A married spouse can file for both spousal benefits and survivor’s benefits. Spousal benefits allow a non-working spouse or one with low earnings history to claim half of their spouse’s social security benefits. A spouse can file these benefits starting at age 62 with some reductions, though they can wait until FRA to receive the full benefit amount. In the case of survivor’s benefits, the surviving spouse can claim benefits as early as 60 years, but there will be reductions as per the SSA guidelines. The other option is to wait until FRA to avoid reductions.

In the case of two-earner married couples, the survivor would receive the higher of either his own benefits or the benefits of the deceased. For couples born before January 1, 1954, restricted claims for spousal benefits is an option.

Tip: In the case of married couples, it makes sense to maximize the benefits of the higher earner by claiming them at age 70. It will ensure that the survivor receives higher social security benefits in case the higher-earning partner passes away.

Widows or widowers

Social security rules for widows or widowers are slightly complicated. They vary depending upon four factors, including the primary insurance amount (PIA) of the deceased at the time of FRA, whether the deceased reached FRA, the age of the survivor, whether the deceased started social security benefits.

Deceased spouse had filed for benefits

If the deceased spouse started benefits at 62 or before reaching FRA, the surviving spouse would get the higher of the benefits received by the deceased spouse or 82.5% of their net benefits. The survivor can start receiving reduced benefits starting at age 60 or wait until FRA to receive full benefits. If the deceased spouse claimed benefits after reaching FRA, the survivor would receive the same benefits as that of the deceased.

Note: If both spouses receive benefits, the survivor would get the higher of his or the deceased spouse’s benefits.

Deceased spouse hadn’t filed for benefits

In the case that the deceased spouse didn’t reach FRA, the survivor would receive 100% of the PIA of the deceased spouse, provided they reached FRA. If the survivor claims spousal benefits before FRA, the benefits will be reduced as per the social security reduction rules. If the deceased passed away after reaching FRA or older age, the survivor would receive 100% of the benefits of their former spouse, along with any additional delayed retirement credits, subject to reduction if the survivor didn’t reach FRA.

Disability benefits

Social security disability (SSDI) benefits are designed for workers who can no longer work or perform the work they did prior to their disability. It is critical to understand that the SSA has strict eligibility criteria for disability benefits. The average disability benefits as of January 1, 2019, stood at $1,234 per month.

Impact of divorce on social security

If you got a divorce but didn’t remarry until age 60, the chances are that you might qualify for spousal benefits on your ex’s record. However, don’t celebrate just now as you still need to meet the SSA’s eligibility criteria. Let’s go over the list:

  • You must have been married to your previous spouse for at least ten years.
  • You should reach age 62 to collect spousal benefits if your ex-spouse is alive. However, if you were born before January 1, 1954, you can wait until you reach FRA, and then file a restricted application for spousal benefits. In the meanwhile, you can let your own retirement benefits grow until you reach 70, thereby accruing delayed retirement credits of up to 32%.
  • In case your ex-spouse has reached retirement age but hasn’t applied for benefits, you can still apply for spousal benefits, provided you qualify other criteria. You must be divorced for at least two years to claim spousal benefits.
  • If your ex-spouse is deceased, you can apply for spousal benefits once you reach the qualified retirement age. However, if you’re taking care of a child you had with your ex-spouse who is under 16 years of age or is disabled, you can start receiving benefits earlier.
  • If your previous spouse is deceased and you remarry after age 60, you might qualify for spousal benefits.

Public employees and social security norms

If you worked in the public sector- city administration, state government or federal government- and receive retirement benefits in addition to social security benefits, your benefits, as well as spousal benefits, are subjected to the Windfall Elimination Provision and Government Pension Offset rule.

Windfall Elimination Provision

Under the Windfall Elimination Provision, WEP, the SSA will reduce your social security benefits by half of your other non-covered government pension. So, if your net social security benefits were $2,000, and you received $800 through a non-covered public pension system, your net social security benefits will be $1,600. The total reduction cannot exceed $463 in 2019.

If you are someone who has worked in a private capacity, before or after your government service, for at least 30 years (earning more than “Substantial income”) and has paid social security taxes, you might be able to avoid this provision.

Government Pension Offset

The Government Pension Offset (GPO) rule applies to the primary recipients, spousal benefits, survivor benefits, or the benefits received by ex-spouses. Under the GPO rule, the SSA reduces the social security benefits of the filer by up to two-thirds of the government income received by the individual. For instance, if you receive $1,200 through your non-covered public pension system, your social security benefits will be reduced by $800. For someone qualifying for social security benefits worth $1,000, they’ll receive only $200 after the GPO deduction.

Note: The WEP and GPO apply differently to active-duty or inactive-duty military personnel. Read more about it here.

How kids receive social security benefits

The Social Security Administration distributed $2.6 billion every month in social security benefits to more than 4.2 million children during 2017. Social security is a critical source of nourishment for the most vulnerable segment of the society, children. The SSA provides social security benefits to children in case of death, disability, or retirement of their parents/guardians. In order to receive social security benefits, a child must satisfy the following criteria.

  • The child must have a retired or disabled parent who is eligible for social security benefits. Social security benefits are provided to children whose parents/guardians passed away after working long enough in a job to receive social security benefits.
  • The child must be unmarried and below 18 years of age; 19 years if the child is a full-time high school student.
  • Social security benefits are extended to disabled children over the age of 18 years provided the disability began before attaining 22 years of age.

New do-over strategy to maximize benefits

Social security rules are confusing, and it’s quite often that people regret drawing their benefits early, especially those who claim reduced benefits before reaching FRA. The good news is that the SSA allows such individuals to opt for a do-over strategy, provided they satisfy certain conditions.

If you are planning for a do-over for your social security benefits, you must:

  • Withdraw your claim application within the first 12 months of claiming benefits.
  • Repay the benefits you or your spouse or family received during this period.

In case you claimed benefits before reaching FRA but want to stop benefits until age 70, the SSA allows you to suspend benefits without making any repayments. Your benefits will accrue the 8% annual delayed retirement credits, though your base for calculation would be lower because of early distributions. You can reinstate benefits at any time before reaching age 70 or wait for automatic reinstatement once you reach 70 years.

For instance, if you applied for benefits at age 62 but would like to stop them at FRA, between the age of 66 and 67, you can apply for a suspension and let your retirement benefits grow 8% annually. If your benefits were 75% at FRA because of an early withdrawal, your benefits could still grow up to 99% of your full-retirement benefits through this strategy.

It is critical to understand that if you suspend your benefits, any spousal benefits you receive, along with the benefits of your spouse or dependent children will stop as well, apart from the benefits of a divorced spouse. Additionally, you’ll be responsible for the Part B premiums of Medicare. Make sure that you have sufficient supplemental income to go through these suspended years.

Note: You must file Form 521 for practicing this strategy.

How to file social security benefits online

While there are multiple options for filing your social security benefits, applying online is the easiest one. Here are the steps you must follow to apply for social security benefits.

  • Create an account on the official social security website using this URL.
  • Some key details that you must have when filing the application are employment information, self-employment activity, any foreign employment information or credits/pension details, military service details, additional income, previous SSI records/applications, Medicare or other social security benefits, and some critical information about your spouse. The application will ask for the date when you want your benefits to begin.
  • Once you have filled all the details, sign it electronically, and submit the application. In some cases, the SSA might require you to send backup documents, so it’s best to have a copy ready. In case of any questions, you can call the SSA directly at 1-800-772-1213.

The link between social security and Medicare

Social security and Medicare share a direct relation, which means higher benefits lead to higher premiums. However, the SSA has a “hold harmless” provision under which it prevents any reduction in social security benefits when cost-of-living adjustments are lower than the scheduled increase in Medicare premiums.

It is critical to understand that individuals with higher gross incomes ($85,000 if single and $170,000 if married) have to pay higher Medicare premiums. Individuals who are above this threshold receive notice from the SSA concerning their higher premiums and the reason behind it.

You can read more about different premium brackets and the SSA guidelines at the end of this article.


Understanding the new rules and strategies around social security

The modern social security rules demand new strategies, especially with the end of the file-and-suspend strategy and the phasing out restricted spousal benefits strategy in 2019. Here is a list of the most suitable social security strategies for couples, widows/widowers, divorcees, individuals, and children.

Married Couples

  • Married couples should delay the social security benefits of the spouse with higher benefits until age 70, allowing the accumulation of delayed retirement credits. It will enable the couple to maximize their retirement benefits while both are alive. Additionally, it will ensure that the survivor gets the highest possible benefits when the other spouse passes away. The spouse with lower benefits should file for benefits at FRA or earlier if none of the spouses are working.
  • If one spouse has no social security benefits, the working spouse must file for benefits to trigger spousal payments. If the spouse with social security benefits waits until FRA to claim PIA payments, it will maximize the survivor benefit for the other spouse in the event of a death.

Divorced Spouses

With the restricted claim strategy phasing out, divorced spouses should make a decision based on their current financial circumstances. The SSA will automatically choose the highest amount out of the individual’s own benefits and spousal benefits.

Individual Filers

Individual filers should wait until FRA to file for social security benefits, ensuring they receive 100% qualified benefits. In case the single filer is employed, it might make sense to delay distributions until age 70; however, the primary reason behind delaying retirement benefits is to maximize survivor benefits, so weigh your options and choose accordingly.


If the family is seeking benefits for children, it is essential to consider different options. Some strategies include:

  • If the primary social security beneficiary was born before January 1, 1954, it is possible to implement the file-and-suspend strategy to trigger spousal and independent benefits.
  • In the case of a single mother with a child younger than 18 years and low or zero individual benefits, it makes sense to file for benefits at age 62, triggering the benefits for the dependent children.

The Bottom Line

Social security filing is one of the most important financial decisions of your life, so it is crucial to analyze all of your options and choose the most suitable one. If you’re in doubt, make sure to consult a financial expert. You don’t want to regret making a financial mistake that could lower your net social security benefits by thousands of dollars.


If you have any questions regarding Social Security and how it relates to your financial future, please contact me now for assistance. You don’t have to navigate tricky financial topics alone!



Medicare Premium Chart


Beneficiaries who file individual tax returns with income:

Beneficiaries who file joint tax returns with income:

Income-related monthly adjustment amount

Total monthly premium amount

Less than or equal to $85,000

Less than or equal to $170,000



Greater than $85,000 and less than or equal to $107,000

Greater than $170,000 and less than or equal to $214,000



Greater than $107,000 and less than or equal to $133,500

Greater than $214,000 and less than or equal to $267,000



Greater than  $133,500 and less than or equal to $160,000

Greater than $267,000 and less than or equal to $320,000



Greater than $160,000 and less than $500,000

Greater than $320,000 and less than $750,000



Greater than or equal to $500,000

Greater than or equal to $750,000



Beneficiaries who are married and lived with their spouses at any time during the year, but who file separate tax returns from their spouses:

Income-related monthly adjustment amount

Total monthly premium amount

Less than or equal to $85,000



Greater than $85,000 and less than $415,000



Greater than or equal to $415,000




Maximizing Social security retirement benefits, Mary Beth Franklin, CFP